Center-South Brazil H1 July sugarcane crush drops 5.4% on year: survey

24.07.2018

The amount of sugarcane crushed in the first half of July in Brazil's key Center-South region is expected to be 45.39 million mt, down 5.4% year on year, but slightly higher than the previous two-week period's 45.31 million mt, an S&P Global Platts survey of analysts found Friday.

Despite the extremely dry weather in Center-South Brazil in July, which could have favored a good pace of crushing, some sugarcane mills were reported to have halted operations for maintenance.

During the July 1 to 15 period, all the five main cane growing states received almost no rain. All of them received a maximum of 1 mm of rain in total for the period.

If analysts' expectations were realized, the cumulative cane crush thus far this season would reach 267.6 million mt, up 8.15% year on year.

The 2018-19 sugarcane season officially started April 1 in Center-South Brazil, the world's largest sugarcane and sugar-producing region.

Industry association UNICA is expected to release its official production figures for the region next week.

In terms of the sucrose content, high levels are still expected as the weather remains drier than usual for this time of the year.

The consensus estimate for the cane's total recoverable sugar (ATR) in the first half of July was 144.68 kg/mt, with individual forecasts ranging from 142 kg/mt to 147 kg/mt. Said figure would be up 9.61 kg/mt year on year and 4.62 kg/mt higher than in the second half of June's ATR.

And if the estimate proves to be right, it would be the highest ATR for the period since the 2010-2011 crop, when the ATR posted was 147.36 kg/mt.

The proportion of the cane that will be used for sugar production in the Center-South in H1 July is expected to be 39.24%, according to the survey, down from 50.41% in the year-ago period, but up from 37.67% in H2 June.

"As the hydrous ethanol floor was assessed below the 12 cents/lb mark and with domestic ethanol prices falling, we expect a recovery in the sugar mix of about 1.7 percentage points compared with the previous fortnight to 39.4%, still well below last year's 50.4%," said Claudiu Covrig, senior analyst for S&P Global Platts Analytics.

Market participants believe that with the combined high ATR and cane crush in the period, the industry could exceed daily hydrous ethanol production capacity if more cane is diverted to production of the biofuel. In addition, a reduction in the amount of storage space available for ethanol could also have triggered a higher sugar mix.

Still, it would be the lowest mix for sugar in H1 July in over 20 years. The last time it was lower was the 1997-98 crop's 31.23%.

As a result, sugar production is expected to total 2.422 million mt in H1 July, down 22.2% year on year, but up 6.4% from H2 June.

Cumulative sugar production between April 1 and July 15 would reach 12.168 million mt, down 14.32% year on year, if the analysts' expectations were to be met.

As more of the sugarcane is expected to be used for fuel production compared with last year, hydrous ethanol output in H1 July is expected to reach 1.491 billion liters. This would be up 43.4% from a year ago, but down 2.8% compared with the previous two-week period.

April 1 through July 15 hydrous ethanol production would be 69.8% higher than the year-ago period at 9.26 billion liters if the forecast is correct.

The pump price of hydrous ethanol in southeastern Brazil averaged 60.31% of the value of gasoline July 8-14, according to the latest data from the National Petroleum Agency. The ratio was the lowest since the week of September 27-October 2, 2010.

Despite the record lowest ratio in nearly eight years, hydrous prices have recently plunged amid a combination of reduced demand at the pumps and large stocks being carried since the beginning of the crop year.

"Tanks are expected to be full in September, but for some producers it is already starting to be a point of concern, which has been triggering selling," said an analyst at a major producing group.

S&P Global Platts' assessment of hydrous ethanol ex-mill Ribeirao Preto was Real 1,830/cu m on Thursday, down Real 120/cu m from a month ago.

Ethanol in Brazil is used in two ways: hydrous ethanol is used as E100 fuel in flex-fuel vehicles and competes with gasoline at the pump when its price is 70% or less of the gasoline price, while anhydrous has a mandatory blend rate of 27% for gasoline.


spglobal

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